The vast majority of South African companies are raising the prices of goods and services to mitigate against economic challenges in the next 12 months.
Data from PwC’s 26th Global CEO survey showed that 71% of South African CEOs said their companies are already raising prices, while 15% are considering price increases.
This is a significantly higher proportion than global CEOs, with only 29% raising prices.
PwC attributes this discrepancy to the significant structural economic issues in South Africa, particularly the inconsistent supply of electricity and deteriorating infrastructure.
Global headwinds are compounded by these local problems, policy uncertainty, poor economic growth, and high unemployment.
These structural constraints limit economic growth and, thus, effectively cap the growth of companies in South Africa.
Two out of five South African CEOs believe their company will no longer be economically viable a decade from now.
The accounting firm’s baseline growth rate for South Africa is 1.3% per annum over the long term. This is barely above South Africa’s population growth rate of 1% per annum, meaning incomes will remain stagnant in the long term.
Poor economic performance and the subsequent rise in unemployment exacerbates the social challenges South Africa already faces, PwC said.
Lullu Krugel, the chief economist at PwC South Africa, said the government cannot solve these problems alone. The public sector “needs the private sector”.
“Businesses need to demonstrate their ability to create value, build trust, and contribute to solving important problems,” Krugel added.
For businesses in Southern Africa, business as usual and focusing solely on profitability has become obsolete.
The private sector in South Africa needs to be proactive and force the agenda to tackle social issues. Otherwise, they will not be solved.
Strangely, South African CEOs are not looking to reduce employee compensation, with only 15% reducing compensation and 3% planning on doing so.
Business leaders in South Africa are also protective of jobs as it is less favoured among respondents to PwC’s survey.
South African CEOs want to reduce operating costs and diversify their product offering to mitigate economic challenges in the next year.